Richemont drops on signs that luxury demand is weakening in the United States and China

(Bloomberg) – Richemont has led luxury goods stocks lower as demand in the United States and China, two of the industry’s biggest markets, begins to slump.

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The Swiss owner of Cartier reported a surprise drop in revenue from the Americas in the three months of June. While Richemont’s sales in Asia rose sharply, China on Monday reported slower-than-expected economic growth, signaling signs of a possible pullback in consumer spending.

Richemont fell 8.2%, the biggest intraday drop in more than a year. LVMH fell 3.7% and Hermès 4.2%.

The luxury industry is counting on a rebound in China after the reopening of this country would compensate for the weakness of the American market. Today, Richemont and its peers face the prospect of a weakening of its two main engines of growth. Last week, Burberry Group Plc said the low end of the US luxury market had softened.

Richemont chairman Johann Rupert said in May that the U.S. market was at risk of a downturn, predicting the country would experience a credit crunch.

Read more: Chinese growth disappoints, fueling calls for more stimulus

Richemont recorded an overall gain of 19% in sales. Jewelery sales rose 24%, meeting analysts’ expectations, while its specialist watch division recorded sales growth of 10% at constant currencies, slightly below analysts’ consensus forecasts.

An 11% increase in sales in Europe was driven by resilient domestic spending as well as tourism from the United States, the Middle East and China.

(Updates with details of Chinese GDP and other luxury stocks)

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